January 2014 IE Publications

This study examines how foreign direct investment (FDI) spurs entrepreneurial activity in host countries. We also investigate why this relationship varies across countries because of domestic socio-political conditions. The findings from our panel analyses of 104 countries from 2000 to 2009 are consistent with our predictions that foreign direct investment positively relates to business creation and this positive effect is strongest in countries with poor institutional support, weak political stability, and low general human capital. Our work provides new insights into how cross-border investments and domestic socio-political conditions jointly influence entrepreneurial activity, especially in emerging and developing economies.

By analyzing internationalization as a dynamic process, we attempt to explain the speed of international operations in terms of learning acquired in the course of past international activities. We consider that the speed of the internationalization process depends on the type of experiential learning that results from decisions implicit in the internationalization process: choice of location and modes of operation. Firms develop two types of learning activities with respect to the selection of foreign markets and modes of operation: diversity and depth of accumulated international activities. We propose that depth of international activities has an inverted U-shaped impact on the speed of the internationalization process, while diversity of international activities has a U-shaped influence on the speed of internationalization process. The results of our longitudinal study of 889 firms over 23 years (1986–2008) suggest that diversity of international activities promotes long-term learning by exposing the firm to richer experiences, although such learning only takes place over time. Depth of international activities may accelerate the internationalization process in the short term, but it eventually restrains its potential for development in the long term. Our research highlights the short-term vs long-term consequences of different types of decisions related to the internationalization process.

This paper develops a dynamic capabilities-based theory of the multinational enterprise (MNE). It first reviews scholarship on the MNE, with a focus on what has come to be known as “internalization” theory. One prong of this theory develops contractual/transaction cost-informed governance perspectives; and another develops technology transfer and capabilities perspectives.

In this paper, it is suggested that the latter has been somewhat neglected. However, if fully integrated as part of a more complete approach, it can buttress transaction cost/governance issues and expand the range of phenomena that can be explained. In this more integrated framework, dynamic capabilities coupled with good strategy are seen as necessary to sustain superior enterprise performance, especially in fast-moving global environments. Entrepreneurial management and transformational leadership are incorporated into a capabilities theory of the MNE. The framework is then used to explain how strategy and dynamic capabilities together determine firm-level sustained competitive advantage in global environments. It is suggested that this framework complements contract-based perspectives on the MNE and can help integrate international management and international business perspectives.

This study examines the impact of early foreign market entry on new ventures’ performance outcomes. Venture age and international commitment are theorized as moderators to address the inconsistent findings of previous research surrounding the performance implications of early internationalization. Results from a sample of international new ventures in China found that the earliness of internationalization positively contributes to firm performance in terms of sales growth, but not innovation and profitability. The performance advantage of early internationalization becomes obsolete as young ventures become mature, especially among those with a low level of international commitment. This study highlights the importance of incorporating time-based dimensions of international venturing for a better understanding of the performance implications of early internationalization.